What Should We Tell the Kids? – Fall 2018

 “Let the kids know what we have. It’ll keep them in touch.”

“Our kids admit that nothing would make them happier than inheriting our money. So we’re going to leave them nothing.”

Sound familiar? We hope not.

 In their financial affairs and estate planning, some folks happily show their adult children everything and prepare them fully for their eventual inheritance. Those folks are unicorns.

How much should we tell our children about our assets, estate plans, and who will be asked to play a role in our plans? That depends, but here are some thoughts.

Assets – We generally favor giving adult children an idea of at least the scope of our assets. The older we are, the more likely it is that we will ask one or more of our children to help us manage our affairs. Giving our children a sense of what we have in advance of seeking their help can be useful. If we are wealthier than our children, we should urge them to become financially literate enough to handle their inheritance. On the other hand, if it is unlikely that our children will be inheriting much, they would benefit from knowing that as well. Some of us prefer gradual disclosure. If we are philanthropic and hope our children will be, too, then a degree of transparency as to our giving and the reasons for it will encourage their philanthropy.

 Estate plan – Some of us want to set up trusts to hold assets for the lives of our children, and others want the assets to go outright to our children. Others are in the middle and want to have funds distributed to children at specific ages or pursuant to specific events. Such decisions are based on our assessment of our children’s circumstances. Often, it makes a great deal of sense to disclose the terms of the plan to the children and explain the reasoning. Our planning may be tied to our perception of the age of financial responsibility (what teenage boy with unlimited funds won’t be tempted to buy a car that he can’t safely handle?), educational achievement, or concern about our child’s mental health, addictions, marital situation or spending habits.

Roles a child may play in the estate plan – Personal representative (formerly known as executor), agent under power of attorney, trustee, and agent under health care proxy – if our children are old enough to be given one or more of these roles, it makes sense for us to let them know we have named them. A child named as agent under a power of attorney should have enough information to step in quickly to provide assistance. A child named as agent under a health care proxy should know something about our wishes regarding treatments and end of life care. If we name a child as personal representative or trustee, the child should learn what those roles mean, where our important documents can be found, and whom the child should contact as a resource if action is needed. In any case, if we are alone and facing a serious illness, concerned about losing capacity, or lucky enough to have reached an advanced age, we have to get over any discomfort about having these conversations and “just do it.”


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